Some customers of the struggling maker of storage products may be in for a surprise when they inquire about warranty repair work on defective drives and cartridges. They may find their drives not at SyQuest, but at Inter-Manufacturing Incorporated, based in San Jose, California.

IMI--which formerly contracted with SyQuest to perform warranty repair
Work--said it is still holding drives and cartridges that were sent
to the company before SyQuest filed
for Chapter 11 bankruptcy protection in November.

Although the products are still under warranty, IMI plans to charge a
minimum of $55 for the repair service, said Johan Willems, IMI founder and
chief executive. SyQuest is no longer paying IMI to service the
warranty products, he said. So IMI is charging customers.

The warranty news was tempered a bit by speculation that two competitors are bidding for the assets of the defunct disk
maker, with one of the likely suitors being Iomega. Iomega makes the popular Zip and Jaz storage products.

Willems cautioned customers that while IMI can replace or fix the
defective drives and cartridges, former SyQuest customers may not receive
the exact product they sent in for repairs.

SyQuest recently shut down its system that allowed IMI to cross-reference
customers' material return authorization numbers with the defective
products it held. As a result, former SyQuest customers may also have a difficult time retrieving the data from their defective cartridges that SyQuest sent to IMI.

Although SyQuest said it hopes to have a vendor in place in the next 30
days to handle warranty repair work, Willems said he can offer limited
service to former SyQuest customers with warrantied and non-warrantied
products.

SyQuest started to
show minimal signs of life late last month. On December 30, the company
reactivated its Web site to provide customers with access
to "product information, specifications, software drivers, utilities,
downloads, and [the company] knowledge-base." Customers, however, say the
service is a hit-and-miss affair and that the Web site is bouncing e-mails
back.

Sale to Iomega?
SyQuest hopes to have a definitive agreement signed by the end
of the week with a prospective buyer for its assets, said Tobias Keller,
SyQuest's bankruptcy attorney.

Keller, however, said it will be up to the bankruptcy court to approve the
offer. Currently, SyQuest is weighing bids from two suitors.

Although Keller declined to identify the candidates, sources said
competitor Iomega, and independent repair storage company PCS, are in the
running.

Iomega officials declined to comment. PCS president Tu Nguyen said his
company would be interested in acquiring SyQuest's servicing business but
that it would not be interested in its manufacturing operations.